the smart ubiquity systems shift disruption · danaher/ cooper industries abb/entrelec schneider/...
TRANSCRIPT
www.harborresearch.com
2013 20152014
theubiquity
shift
smart systemsdisruption
HarborResearch
smart systems perspective
Page 2
The Advent of Smart Systems, Services & The Internet of Things....
These forces are informing a new trend we call “Smart Systems.” In its simplest form, Smart Systems is a concept in which inputs—from machines, people, video streams, maps, newsfeeds, sensors, and more—is digitized and placed onto networks. These inputs are integrated into systems that connect people, devices, business processes, and content to enable collective awareness.
Pervasive Network Integration
Value-Added Services
New Application Values
Broader reach and range of dependable wireless networks will drive significant new applications value from improved reliability, quality and data rates.
Availability of new managed services based on data aggregation, management and analytics capabilities.
Ability to sense and respond in real time will drive more adaptive capabilities. Significant growth for asset management, location tracking services, security, and supply chain integration based on interactions among devices, mobile workers and systems management.
Virtually all electronic and electro-mechanical products are being designed to automatically transmit information about status, performance and usage and can interact with people and other devices in real-time.
Connectivity of Things & People
©2010 - 2013 Harbor Research, Inc. All rights reserved. http://www.harborresearch.com [email protected] USA • 800.595.9368 • 303.786.9000
smart systems perspective
Page 3
Smart Connected Services Enable Manufacturers To Access A Much Larger Percentage of Their Customers’ Life Cycle Spending...
Smart Services Opens Up Many New Growth Opportunities For Product OEMs Across The Customer’s Usage Life Cycle
This phenomenon is not just about the dichotomy between people communicating with people or machines communicating with machines: it also includes people communicating with machines (e.g. a networked ATM), and machines communicating with people (e.g. automated stock ticker alerts on your PDA). The Internet’s most profound potential lies in its ability to connect smart sensors, devices, and ordinary products into a global “digital nervous system” that will allow people and businesses to achieve undreamed-of awareness, efficiency and optimization.
Beyond efficient support of products and equipment, the convergence of collaborative systems and machine communications will enable nearly new modes of interaction and implies a total paradigm-shift. The depth of this shift has begun to suggest itself, but it is by no means accomplished.
Visionary product manufacturers and service companies are already leveraging embedded computing and networking technologies to deliver smart, remotely monitorable goods that will support entirely new modes of customer-device interaction and service delivery.
Life Cycle Cost To Support Equipment Can Range from 5X To As Much As 15X The Purchase Cost of the Device
0%
20%
40%
60%
80%
100%
Machine or Equipment
Purchase Price
Software Updates
Labor Costs
Support Contracts
Energy & Resources
Parts Replacement
Cost of Downtime
Administration
smart systems perspective
Page 4
As networks have invaded the “physical” world, traditionally unique components and interfaces between and among electronic as well as mechanical elements are becoming more and more standardized.
The implications of these trends are enormous. No product development organization or its suppliers of componentry and sub-systems will be able to ignore these forces -- product and service design will increasingly be influenced by common components and sub-systems. Vertically defined, stand-alone products and application markets will increasingly become a part of a larger “horizontal” set of standards for hardware, software and communications.
As it becomes easier and easier to design and develop smart systems, competitive differentiation will shift away from unique, vertically focused product features towards how the product is actually used and how the product fosters interactions between and among users in a networked context.
The opportunities this opens up to forward thinking product and service organizations are nearly infinite. Businesses can begin to explore many new possibilities for system solutions unthinkable just a few years ago.
Connectivity & Integration Will Become Universal As Components, Platforms & Systems Become Ever More Standardized, Open and Collaborative...
However, As The Physical and Virtual Worlds Continue To Converge, The Traditional Business Models Manufacturers Have Relied On For Decades Will Be Severely Disrupted....
smart systems perspective
Page 5
How Well Prepared Are Manufacturers For The Advent of Smart Systems and Services?
In Most Companies, People, Functions & Processes Are Too Disconnected To Create New Smart Systems Opportunities....
Large organizations have many rules and policies that often seem completely disconnected. We have created language, business processes and systems that seem to be a triumph of technique over value and performance. Consequently, most businesses today are organized around functional disciplines that only interact on an “as needed” basis.
Most knowledge comes from human experience and expertise. Today, however, knowledge and expertise largely resides in functional silos and systems dispersed across organizations. Acting singularly, functional organizations are constrained by the resources under their control. Legacy processes and habits inhibit any natural ability to communicate and work together to solve big problems or create new solutions. In many companies, lean practices have been applied so aggressively that people are simply consumed by “running the business.” It restricts their ability to harness the collective intelligence available throughout a company and its networks to ensure timely decisions and creative solutions.
In this environment growth is dependent on interacting in new and creative ways. Linking functions by breaking down the barriers to communication is the first step, but it can’t stop there. The key is building collaborative networks.
R&D & New Business Development
Marketing& Sales
Purchasing &Strategic Sourcing
smart systems perspective
Page 6
In Fact, We Believe New Business Creation In Most Industrial Manufacturers Is Broken ..........
Venture Development For The Internet of Things Requires A Different Approach .......
An Approach That Can Span From Very Early Stage To Growth Maturity .....
Early stage nurturing of new technology ventures is really a “no-man’s” land today
These types of opportunities are not well addressed by either corporate venture programs or institutional investors
The “spread bet” mode of venture capitalists & private equity firms has been increasingly trending towards more and more conservative investments for several years .....
Corporations have become addicted to acquisitions and consolidation as a growth mechanism ........ companies are willing to overpay for established businesses to mitigate risk ........ players need to understand that to create sustaining value they must take risks .....but how?
Existing schemas, institutions and approaches for new venture development are, for the most part, broken....
The complexity, interdependent relationships and related timing required for new growth ventures in the Internet of Things arena only compound the challenges
Diversifed Industrial Players Need To Completely Re-Think How To Create New Growth Ventures...
smart systems perspective
Page 7
Why Should Manufacturers Care? Because Opportunities Of Vast Scale and Scope Are Available To Product OEMs and Value Adders...
If the opportunity scale across the broad range of building related devices equals approximately 6X the value of base products in smart services value, then the overall market opportunity in the smart connected buildings arena equates to almost a trillion dollars in value added services
If you examine the cumulative opportunity that grows from the smart buildings arena, as just one example, and consider the leverage available through relationships to capture information, aggregate intelligence, provide facility and energy optimization, this opportunity alone in just one or two product sectors could amount to as much as hundreds of biillions of value add.
Smart System Application Opportunities In Buildings, Facilities and Energy Management
$ Tier 1 PBT% 10-20% 11-16% 8-12% 13-16% 12-14%
8-10
%
4-6%
10-1
2%
10-1
2%
10-1
2%
10-1
2%
3-5%
8-10
%
6-10
%
12-1
6%
9-11
%
6-15
%
0-5%
4-7%
8-12
%
11-13% 11-14% 8-10%
9-15
%
10-12%
5-10
\%
13-15%
14-1
7%
8-11
%
8-10
%
10-1
4%
8-12
%
10-1
4%
8-12
%
Sales $B 3.8 6.1 4.8 3.6 2.5 18 10 11.3 10.3 3.
4 1 1 3 4 8.5 0.3
0.2 10 1.6 9 1.5 3.8 5.0 2.8 4.7 2.1 2 0.8
0.5
0.5
0.4
1.6
Pow
er
Con
trol
Circ
uit
Bre
aker
s
Driv
es
Wiri
ng
Dev
ices
Fuse
s
Mec
hani
cal
Equi
pmen
t
End
Dev
ic's
BA
Equi
p.
Syst
em
Inst
alla
tion
Intr
usio
n D
etec
tion
Acc
ess
Con
trol
CC
TV
Ala
rm D
evcs
Ala
rm P
anls
Inst
all &
Se
rvic
e
Lam
ps
Ligh
ting
Fixt
ures
CAT
V/D
BS
Soun
d,
Secu
., &
Elev
ator
s
Encl
osur
es
Pow
er
Qua
lity
&
Rel
iabi
lity
Rac
eway
s &
fitti
ngs
Pow
er
Con
nect
ors
Term
inal
B
lock
s &
I/O
Ligh
ting
Con
trol
Secu
rity
&
Acc
ess
Sens
ors
Met
erin
g
Fac.
Mgm
t. So
ftwar
e
Inte
rnet
En
able
men
t
Net
wor
k Se
rvic
es
Plat
form
s
App
licat
ions
Transport Applications & App'l ServicesElectrical Distribution Infrastructure Home InfLighting CableBAS Security Fire
SiemensHonHon Schneider Sie
Johnson Controls
Trane UTCTrn
Sch
Schneider
16
Trn
JCI
SchSch
JCI HonSiemensJCI
Tyco UTCCarCarrier
HoneywellHoneywell
Genlyte Thomas
Bel
de
ALG
SieHon.
FCI SiemensT&B
Sie
men
s
Perf
Tim
es F
iber
National Ser. Ind.
Lithonia
GE
SierraCinturion
LutronLegrandIntmtc
Land
is &
Gyr
Hager
Hubbell
UTC (Otis)
Power Delivery & Control
ABB
Telit
Thysen KruppLII
Col
eman
Schneider
Com
msc
ope
Cooper
Emerson
Eaton
SchUTC
Schneider
Cooper
Itron
Liberty
KONEGene
sysGoodman
Tyco
�itsubishi
�ockwell
UTC Tyco
Pentair
�ittal
Fu�i
Siemens�itsubishi
ABBHitachi
SchindlerSiemens
Leviton Bel
den
Tyco
Phi
lips
Schneider
Cooper
Ferra�
Siemens
Tyco
% o
f Mar
ket
Eaton
Schneider
Siemens
GE�itsABBToshFu�i
��
ABB
�askawa
�ockwell
Danfoss
LegrandMitsubishi
Schneider
Schneider
GEHubbell
ToshibaHagar
Eaton
Siemens
�atsushita
Legrand
HagerPanduit
Siemens
Daikin Elster
UTC (Carrier)
Phoenix Contact
Honeywell
�tshta
Leviton
UTC
�a go
Schneider
Sim
ple
�OK
Tyco
H
oney
wel
l
T&B
EGS
IB�
ATT
�odafone
�eri�on
�elo
Trid
ium
Digi
Fed�E
Cooper
PCS
Enernoc
Comverge Pacific
Controls
A�eda
$170B
smart systems perspective
Page 8 Bubble size = Enterprise Value
1996 1997 1998 1999 2000 20022001 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Honeywell/Measurex
Siebe/APV
Siebe/Eurotherm
AlliedSignal/ Honeywell
Honeywell/Pitway
Danaher/Cooper Industries
ABB/Entrelec
Schneider/Legrand GE/Interlogix
Siebe/ BTR
KKR/Legrand
Eaton/Delta Electronic
GE Power Systems/Jenbacher Werke
UTC/Chubb
IMS Meters/Invensys
Schneider/TAC Building Automation
Honeywell/Silent Wireless
Schneider/ MGE UPS
Eaton/Powerware
ABB/Elsag Bailey
UTC/Kidde
GE/Edwards
Schneider/BEI Technologies
Schneider/Andover Controls
Parker Hannifan/SSD Drives
Honeywell/Novar
Doughty Hanson/Moeller
Barclays PE/Alstom Power Conversion
Johnson Electric/SAIA Burgess
Baldor Electric/Reliance & Dodge
Eaton/Moeller
Chicago Bridge & Iron/LummusEaton/
MGE Small Systems UPS
Eaton/Phoenixtec
Emerson/Roxar
Emerson/ Artesyn
Tech
Bouygues/Alston
Schneider/APC
3i/ DuezPower Systems
Cooper Industries/MTL Instruments
Schneider/Xantrex
Emerson/Chlonde
Johnson Controls/
York
UTC/GE
Security
Alstom & Schneider/Areva T&D
Doosan/Skoda Power
Danaher/BeckmanCoulter
Cooper/ Laird
Regal Veloit/A.O Smith EPC
Caterpillar/Electro Motive Diesel
Siemens/Militronics GE/
Wellstream
Schneider/Leader Harvest
ABB/Chloride
GE/John Wood
GroupCaterpillar/Bucyrus
ABB/Ventyx
Honeywell/ Sperian
Schneider/Telvant
Dresser Rand/ Grupo Guasco
GE/Dresser
3M/ Cogent
3M/ Winterthur
LBO France/Converteam
Honeywell/Norcross
Danaher/Keithley Instruments
Robbins & Meyers/ T-3
Catepillar/ MWM
ATI/Ladish GE/
Converteam
UTX/Goodrich
ABB/ Baldor Electric
Terex/ DemagSulzer/
Cardio Solutons
Pentair/Norit ProcesTechnolgies
10 Mar 2000Nasdaq all time high
10 Mar 2000Stock Market Crash
7 Mar 2003Recovery in stock
5 Oct 2007All time high for the S&P 500
6 Mar 2009Trough in the S&P 500
5 Aug 2011S&P downgrades US debt
3.0
9.0
15.0
21.0
Abandoned
More Importantly, There Are Fewer and Fewer Acquistion Targets Left For Manufacturers...Global expansion; re-engineering; lean practices; mergers and acquisitions - all reasonable strategies for growth and value creation. But in a marketplace of rapidly consolidating businesses what worked in the past is less likely to work now or in the future. For many companies, these strategies have already reached the point of diminishing returns.
smart systems perspective
Page 9
What Progress Has Really Been Made In Driving Organic Smart Services Opportunities?In many ways, most of the larger diversified industrials have not gotten any further than “first base” in realizing connected smart systems and services values....
ProvideBusiness
Process Improvements
ImproveOperating
Efficiencies
EnhanceTechnology
Infrastructure
Cust
omer
Ben
efit
Simple Compound Complex
Customer Value
Many lines of business have moved to smart remote services programs that, to date, are largely focused only on services delivery ef-ficiencies
Based on Harbor Research analysis, many/most of these systems only utilize about 5% of the data value collected ..........
While many players are talking a Big Data game, few are realizing any significant new value from machine data and analytics
smart systems perspective
Page 10
Machine To Machine Systems and Smart Services Technologies Are Still Evolving To date, remote services opportunity has been comprised of “simple” monitoring applications & related tracking/location services….. future development will be focused on collaboration between devices, people and systems
Connections
Time
Compound
• Integrated Automation, Condition Monitoring & Asset Management Systems
• Managed Security Services
Complex
• Crowd-Sourced Content for Machine Troubleshooting
• Brokerage / Auction for Spare Parts or Sub-Contractors
Simple
• Equipment Monitoring • Maintenance Dispatch • Alerts & Alarms
Complex Applications Applications that drive interactions between and among devices, device sub-systems and people and can also allow extending/expanding values from third party collaboration and large scale [big] data integration/analytics • Multi-Vendor Brokered Services • Integrated Real Time Pricing for Electricity • Multi-vendor Maintenance Collaboration
Sensor Data Fusion / Integration
Compound Applications Applications that involve multiple collaborating [peer-peer] devices or significant interactions between and among devices, systems and people. • Multi-Party Equipment Support • Real-Time Demand Response
Maintenance Support & Collaboration
Real-Time Demand
Response
IT, Ops & Process
Automation Integration
Collaboration & Analytics
Simple Applications Applications tend to be remote support-driven applications that involve monitoring/upgrades of installed base of machines in the field – such as motors, instruments, machines, etc.
• Tracking • Product Support • Product Upgrades • Diagnostics / Monitoring
Industrial Equipment Monitoring
Field Force
Dispatch
smart systems perspective
Page 11
So What Will It Take To Really Win Big In The Future Smart Services Arena? To drive success, players will need a whole new frame of reference to work with
Developing Solutions Based on User Centered Experience
Organizing The Rapidly Growing Amounts of Data From Open Systems For Discerning Valuable Patterns via Analytics
Understanding Behaviors Well Enough To Motivate Real Collaboration Across Organizations, Functions and Delivery Chains
Leveraging Human Capital and Skills In This Connected World Will Create Entirely New Solution Values
Potential To Engage & Leverage Extended Communities of Users, Companies, OEMs, Suppliers With Real-Time Interactions and Information Value
Emerging Technologies, If Properly Nurtured and Applied, Can Foster Many Opportunities To Disrupt Current Competitive Structure
Technology Skills
Relationships
Experience
Data & Content
Behaviors
The solutions we are describing here will have far less managerial hierarchy, command and control decision making or proprietary ownership of ideas than companies have been accustomed to.
These networks will be self-organized by people who are motivated to explore and develop ideas they care deeply about.
Collaborative innovation will extend beyond ideas about new products and services to the very manner in which business is conducted.
To discover, design and develop innovative systems, organizations must consider all the elements involved and the context they fit into.
smart systems perspective
Page 12
What Is The Internet Of Things and ... ... Why Is It So Important?
Where Are The Opportunities and … … How Do We Get There?
Where Are The Opportunities and … … How Do We Get There?
In the not too distant future, hundreds of millions, then billions, of individuals and businesses, with bil-lions, then trillions of smart, communicating devices, will stretch the boundaries of today’s business and social systems and create the potential to change the way we work, learn, entertain and innovate.
Global expansion; re-engineering; lean practices; mergers and acquisitions. For most companies these strategies for growth and value creation have reached the point of diminishing returns. As networks continue to integrate the physical and virtual worlds - the Internet of Things - what worked in the past to drive growth is less likely to work now or in the future...
The assumption that the role of new business design and development is only about making existing products or services more attractive no longer works.
We believe smart systems design needs to transcend discreet product or service innovation. Business developers need to creatively imagine fully developed systems and whole marketplaces.
To discover, design and develop innovative smart systems, organizations will need new and uniquely facilitated processes….
Smart systems and services will increasingly have less managerial hierarchy, command and control decision mak-ing or proprietary ownership of ideas. Diverse collaborative networks will be self-organized
by people who are motivated to explore and develop ideas they care deeply about. Business innovation will extend beyond ideas about new products and services to the very manner in which business is conducted.
Building new ventures for the Internet of Things requires new and very different modes of design and development – organiza-tions will need to push the boundaries of collaboration to include many new and unfamiliar participants – “strange bedfellows…..”
Discover
Define
Design
Develop
Understanding Emerging
Smart SystemOpportunities
Anticipating Experiences,
Interactions and
Relationships
Determining Value Creation Role
BuildingThePlatform
The Internet of Things Will Force Manufacturers To Create New Ways To Create Growth... ......“R&D For New Business Design”
smart systems perspective
Page 13©2010 - 2013 Harbor Research, Inc. All rights reserved. http://www.harborresearch.com [email protected] USA • 800.595.9368 • 303.786.9000
Value Created ............ Is Informed By Community Interactions ....The relationships and interactions we help foster serve as a context for deep insight and more value creation. Every relationship building event, every workshop and platform project, regardless of its focus, is enhanced by the range and depth of these relationships.
Harbor seeks out clients whose strategic and business develop-ment mode shows a desire to drive disruption and manage change effectively, both in their organiza-tion and through their relationships in the marketplace. These are the forward looking competitors who can benefit most directly from the breadth of knowledge and process skills embodied in Harbor.
lairtsudnI Energy & Infrastructure Consumer Healthcare Buildings Transportation